CalPERS to be sole owner of giant Chicago-area mall

Woodfield Mall
CalPERS is set to take full ownership of the Schaumburg, Ill. Woodfield Mall

CalPERS is set to take full ownership of the Chicago area’s largest shopping center, Woodfield Mall in Schaumburg, Ill., in a deal that values the shopping center at more than $1 billion.

The $245.3 billion California Public Employees’ Retirement System, Sacramento, agreed to pay more than $500 million for a 50% stake in the mall owned by the pension fund of Detroit-based General Motors Co., sources said. CalPERS already owns the other 50%.

The GM pension trust acquired its Woodfield stake 14 years ago. Spokesmen for GM and CalPERS did not return calls.

CalPERS emerged from a field of bidders that included several large pension funds, Simon Property Group and General Growth Properties, the nation’s two largest mall owners.

The sprawling suburban Chicago structure is the nation’s ninth-largest shopping mall, with nearly 2.2 million square feet. Almost 1.1 million square feet of that, occupied by four of the mall’s five anchor stores, is owned separately and is not included in the sale.

The exact price could not be determined, but a $1 billion-plus valuation of the trophy property puts it well over $900 per square foot, rarified territory that could be seen as a promising sign for retail real estate owners that were hit hard by the recession as consumers cut back on spending.

Woodfield was the largest mall in the U.S. when it opened in 1971.

“You have one investor who’s making a big bet on an asset and a market,” said Dan Fasulo, managing director and head of research at New York-based research firm Real Capital Analytics Inc. “It's a vote of confidence, especially when it’s CalPERS, one of the largest investors in the world.”

The capitalization rate, or first-year return, in the Woodfield deal is below 5%, a low rate that demonstrates the demand for top regional malls, sources said.

“It's one of those generational deals,” said George Good, an executive vice president in the Oak Brook, Ill. office of Los Angeles-based CBRE Inc. “It doesn’t come around that often.”

The mall is more than 97% leased and attracts more than 27 million visitors each year.

Ryan Ori is a reporter at Crain’s Chicago Business, a sister publication of Pensions & Investments.